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Changing the Game with Your Customers – A Supply Chain Strategy in Action ECR Asia Pacific Conference 2008, Thailand Jeffrey Russell, Accenture / Metta.

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Presentation on theme: "Changing the Game with Your Customers – A Supply Chain Strategy in Action ECR Asia Pacific Conference 2008, Thailand Jeffrey Russell, Accenture / Metta."— Presentation transcript:

1 Changing the Game with Your Customers – A Supply Chain Strategy in Action
ECR Asia Pacific Conference 2008, Thailand Jeffrey Russell, Accenture / Metta Siramongkholkarn, L’Oreal

2 In order to drive Consumer Products companies performance to the next level, many are adopting a ‘Game Changing Supply Chain’ strategy - Game Changing Supply Chain - Supply chain differentiation based on customer / consumer behaviour and value to drive top-line growth Value - Performance Optimization - Focus on service levels by raising the performance bar, fine-tuning the overall model and collaboration with the extended supply chain. - Every Day Great Execution - Getting the basics right in terms of people process, systems, organisation and data. Cost optimisation through rationalisation of the cost base Supply Chain Performance Journey Copyright © 2008 Accenture All Rights Reserved.

3 Effective supply chain strategies form the basis of competitive advantage and increase shareholder value Developing differentiated channel value propositions Improving the ability to meet customer needs and buying behaviour Reducing total cost to serve as the level of service provided is varied between channel segments Aligning operations and sales and marketing in the way they treat customers Enabling the organisation to structure resources around segments, e.g. options to outsource customer service activities for selected segments vs retain in-house Copyright © 2008 Accenture All Rights Reserved.

4 Typical benefits achieved in FMCG companies through customer aligned supply chains
Copyright © 2008 Accenture All Rights Reserved.

5 Supply Chain Strategy Supply Chain 1.0
Historically, FMCG companies have developed a ‘one size fits all’ supply chain that is designed to achieve cost efficiency -- Accenture’s SC Customer Alignment Framework -- Strategy Supply Chain Strategy Demand Generation Market Segmentation Product Segmentation & Portfolio Management Customer Segmentation Demand Profiling & Forecasting Supply Chain 1.0 Supply Alignment Supply Replenishment Strategies Supply Sourcing Options Network Optimisation Fulfilment Operations Cost to serve Sales & Operations Planning Performance Metrics Leadership Behaviours Culture Capabilities Process Organisation Talent Technology PLM Risk Management Foundation Copyright © 2008 Accenture All Rights Reserved.

6 Accenture’s Customer Alignment Framework provides the structure and rigor to design ‘fit for purpose’ supply chains for differentiated customer/product segments Supply Chain 3 Product Segmentation + Portfolio Management Market Segmentation Customer Segmentation Demand Profiling & Forecasting Supply Replenishment Strategies Supply Sourcing Options Network Optimisation Fulfilment Operations Supply Chain 2 Strategy Foundation Supply Chain Strategy Supply Alignment Demand Generation Business Strategy Supply Chain 1 Market Segmentation & Portfolio Management Cost to serve Sales & Operations Planning Performance Metrics Leadership Behaviours Culture Capabilities Process Organisation Talent Technology PLM Risk Management Supply Chain 2.0 Supply Chain 1.0 Copyright © 2008 Accenture All Rights Reserved.

7 Example Supply Chain Re-design “fit for purpose”
6 – 12 Months SC Manager SC Manager Segment 1 SC Manager Segment 2 SC Manager Segment 3 Customer Care Sourcing / Procurement Physical distribution Customer Care Customer Care Segment 1 Segment 1 Segment 1 Customer Care Sourcing / Procurement Sourcing / Procurement Segment 2 Segment 2 Segment 2 Sourcing / Procurement Physical distribution Segment 3 Segment 3 Segment 3 Physical distribution Physical distribution Challenges : - multi-skills Supply Chain Managers - Limit increase of headcounts Copyright © 2008 Accenture All Rights Reserved.

8 Benefits after 1 Year Privileged Relation 1 Point of contact between Supply Chain manager (supplier / retailer) Tailor-made Service (especially for Mass Market retailers) 100% focus on Service level : Gain 10% in average over 12 months Team/talent development : Create succession Plan Copyright © 2008 Accenture All Rights Reserved.

9 Customer Relationship Demand Predictability
Different supply chain models are more appropriate depending on the demand predictability and the nature of the customer relationship Lean Agile Loose Transactional ‘Base Model’ Segment 4 Segment 3 Agile Customer Relationship Flexible Segment 2 Collaborative Joint Planning Segment 1 Tight High Demand Predictability Low Copyright © 2008 Accenture All Rights Reserved.

10 Potential service offerings for strategic customer group
Potential service offerings to Customer Group: Tier 1 strategic importance Low relative demand variability Demanding behaviour Trade terms Efficient Assortment / Ranging Growth Incentives Product Discount - case deals Checkout Display Promotional Display Fulfilment Weekend deliveries Advance shipment notification Backhaul Ex factory gate / NDC Cross docking Direct store delivery Drop trailer Operational Integration Category Management Cash Management Standard (prompt) payment Accelerated payment Electronic payment Order to Cash Web ordering Field sales call Phone / fax EDI Weekend ordering Short lead time EDI invoice EFT e-POD CRM Nominated logistics contact Copyright © 2008 Accenture All Rights Reserved.

11 Differentiation between the stable and variable components of demand is a key step to determine fulfillment setup – managing volumes differently balances service levels and cost to serve - Demand Types - - Fulfilment setup - Identify what parts of the business can be treated as fundamentally stable: Stable, predictable demand Commoditised or mass market products Collaborative customers Fulfil through a ‘lean’ supply chain configuration: Maximum capacity Lowest cost Long lead time Identify what parts of the business are variable and truly complex: Variable demand Promotions Premium products Low visibility customers Fulfil through a more flexible supply chain: Local sourcing and / or finishing Short lead times Variable configurations Customer C1 Indicative stable / variable split Customer C1 Indicative SC alignment Variable (40%) = 59% Stable Stable (60%) = 41% Copyright © 2008 Accenture All Rights Reserved.

12 So in summary, consumer goods companies need to change the game while continuing to deliver everyday execution - Game Changing Supply Chain - Supply chain differentiation based on customer / consumer behaviour and value to drive top-line growth Value - Performance Optimization - Focus on service levels by raising the performance bar, fine-tuning the overall model and collaboration with the extended supply chain. - Every Day Great Execution - Getting the basics right in terms of people process, systems, organisation and data. Cost optimisation through rationalisation of the cost base Supply Chain Performance Journey Copyright © 2008 Accenture All Rights Reserved. 12

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